Analysis

Trump signals end to preferential trade treatment for India

In a letter to the US Congress on March 4, US President Donald J. Trump wrote that he intends to end preferential trade treatment for India. Trump wrote that he had taken the decision because “after intensive engagement between the United States and the Government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India.” It is important to assess exactly what this decision means and consider the full range of implications for the US-India trade relationship.

The Indian Air Force strike on what India claims was a terrorist camp in Balakot, Pakistan, on February 26 followed by the Pakistani air strike on targets in India-administered Kashmir have placed both countries on a perilous path to war. The escalation ladder on any such military actions between these two nuclear-armed neighbors remains very steep. Each is equipped with standoff weapons that can be launched from air platforms without sending troops across their border, and increasingly have been talking of the use of miniaturized nuclear weapons euphemistically labeled “tactical.” Once they reach that level, a full-scale war, involving dozens of nuclear weapons could engulf the subcontinent with grave consequences for the whole region and the world. Nuclear Winter, the shutting off sunlight from the Northern Hemisphere of the globe, would mean no light or food for the world. This is not science fiction but reality. Hence, it is critical that leaders in India and Pakistan defuse the current situation before it becomes impossible to retrieve.

A new set of tax reforms announced by Pakistani Finance Minister Asad Umar on January 23 follows pressure from the International Monetary Fund (IMF) from which Islamabad is looking to secure another loan. The bill, which seeks to boost foreign and domestic investment, comes as Pakistan faces a balance-of-payments crisis on its foreign loans intensified by currency devaluations and rising energy imports.

The tax measures would be Pakistani Prime Minister Imran Khan’s second set of fiscal reforms since taking power in July 2018. 

In April 2018, India’s central bank—the Reserve Bank of India (RBI)—issued a new rule for payment systems providers operating in the country. Under the rule, all user data collected within the borders of the country needed to be localized within six months. The RBI said it was motivated by the need to have “unfettered supervisory accesses” to such data, given the fast-growing and increasingly technology dependent payments ecosystem in India. This new data protection rule is just one part of a larger set of multi-sectoral data protection and privacy measures being considered by India, put forth in a contentious draft Personal Data Protection (PDP) Bill in July 2018. The draft PDP Bill is expexted to be introduced to Parliament this summer after the Lok Sabha elections in India in May 2019.

After seventeen years of war in Afghanistan, the NATO Mission Commander, US Army Gen. Austin “Scott” Miller, provided a candid assessment of the situation, stating: “This [war in Afghanistan] is not going to be won militarily… This is going to a political solution.”


Last week, talks between Zalmay Khalilzad, the US special representative for Afghanistan reconciliation, and the Taliban produced a tentative agreement that has generated hope for peace. What then are the mechanisms through which the military resources of the remaining thirty-nine troop-contributing nations can be translated into an enduring political resolution in Afghanistan?

There is renewed hope for a settlement to the seventeen-year-old war in Afghanistan—although significant questions remain.

US Special Representative for Afghanistan Reconciliation Zalmay Khalilzad is reported to be making headway in his talks this week with the Taliban in Doha, Qatar. Although Khalilzad has consulted with most of the relevant Afghan and regional actors since last September, details of the full range of discussions are still sketchy as they may arouse undue suspicions or misunderstandings in Kabul and in other concerned capitals.

US President Donald J. Trump’s demand that the Pentagon plan for the withdrawal of 7,000 US troops from Afghanistan should not be viewed in isolation as it coincides with his decision to disengage from Syria, which, in turn, seems to have triggered the resignation of Secretary of Defense James Mattis—viewed by many as a seasoned strategist and supporter of a nuanced approached to the US missions in Syria and Afghanistan.

Trump’s Afghan withdrawal coincides with an ongoing effort, kicked off with the appointment of Zalmay Khalilzad as the US special representative in September, to end the seventeen-year-old war in Afghanistan. If not coordinated, the withdrawal of US troops could hinder Khalilzad’s efforts and bolster the Taliban’s negotiating position. This, in turn, could weaken the positions of the US and Afghan governments, including political elites in Afghanistan, domestically as well as at the regional level. 

One year on, there appears to be little to show for US President Donald J. Trump’s strategy for Afghanistan. The administration needs to implement this strategy in a way that creates an opportunity to end the war in Afghanistan while advancing core US interests of defeating terrorism and demonstrating that a moderate Islamic state, aligned with the international community, can succeed.

The Atlantic Council’s South Asia Center convened policymakers, analysts, and diplomats to assess the gaps in and imminent challenges facing the US strategy in Afghanistan. In a resulting report, “A Review of President Trump’s South Asia Strategy: The Way Ahead, One Year In,” these experts provide some important recommendations to the administration. Here’s a look at those recommendations.
Even as another turbulent year draws to a close in Afghanistan, 2019 could end up becoming a pivotal one for a nation caught between geopolitical power projections, evolving peace and political pressures, and contrasting visions for the future—unless there is a concerted effort to agree on an inclusive, practical, and timebound political process that includes a peace plan.

Islamabad seeks yet another IMF bailout

Pakistan, faced with a mounting debt in part due to a multibillion-dollar infrastructure project with China, has turned to the International Monetary Fund (IMF) for yet another bailout. The IMF, however, has made clear that a loan would be contingent on Pakistan being completely transparent about its debts to China; the United States—one of the largest stakeholders in the IMF—has said that Pakistan must not use the loan to repay China.

The $60-billion China-Pakistan Economic Corridor (CPEC) is a series of extravagant infrastructure projects intended to increase regional connectivity. CPEC is part of China’s trillion-dollar Belt and Road Initiative (BRI).

Previous Pakistani administrations overestimated the role of largescale infrastructure projects as drivers of economic growth and underestimated the costs. While CPEC has the potential to bring much-needed economic development to Pakistan, its price tag threatens to plunge the country further toward fiscal instability.


    

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